Solana’s Bid to Take On Ethereum

Though Bitcoin may be the focus of most cryptocurrency headlines and hype, Ethereum has long been viewed as the platform that enables decentralized finance, one of the most transformative aspects of digital blockchain technology. 

With its ability to host banking, trading, smart contracts and other financial transactions without involving banks or other intermediaries, Ethereum has garnered a huge following among DeFi fans. But Ethereum also has been dogged by complaints over slow speed and high fees, something the network has repeatedly sought to address. Those issues have paved the way for a host of challengers promising a better, faster product. 

One of those rivals is Solana Labs. Founded in 2017, it just raised $314 million through a private token sale led by Andreessen Horowitz and Polychain Capital. The company has been described as an “Ethereum killer” with the goal of becoming blockchain’s new golden child.

I spoke to Solana founder and CEO Anatoly Yakovenko and Chief Operating Officer Raj Gokal to find out what they envision for both their company’s future and that of DeFi. The conversation has been edited for length and clarity.

The Information: How were you able to pull off your recent $314 million token sale?

Yakovenko: We've never raised the massive rounds that our competitors have. We’ve always kind of had barely enough. We were never starving to the point of failure, but we were always hungry because there was always less than 18 months of runway. 

We’ve talked to [Andreessen Horowitz] and Polychain throughout our development process and we always kind of needed to show those proof points and how the tech works. When we launched last year, we just started knocking down all of the proof points that people expected to be hard. 

Solana is often labeled as an “Ethereum killer.” How do you feel about that characterization?

Yakovenko: We’ve always had our sights on much bigger dragons. So the seed deck for Solana said it’s a blockchain at Nasdaq speed. This idea of running central limit order books on-chain wasn’t targeting Ethereum; it was targeting these financial institutions like Nasdaq.

All of those [institutions] can be disintermediated with commodity hardware, commodity software run by volunteers around the world. Today, there are a bunch of [efforts] building overlapping features, so we don’t really look at it as us versus Ethereum.

Is gaming a way to get DeFi introduced to the general population?

Gokal: I would say so. I think what happened in the last year is that the traditional capital markets for large enterprises started to look like games, too. And that’s what we saw with Gamestop and all the meme stocks. And Elon Musk. So I think those worlds are going to continue to merge together. And yeah, I mean, if it's more fun, why not?

What trends in DeFi are you most excited about?

Gokal: We know that users can interact directly with borrowing and lending protocols, and that those modern lending protocols can combine with other aspects of trading in interesting ways. Seeing people turn those into literal games is a really interesting thing because I think it reflects what users already want. That's what we've been seeing—people want to have fun with the way they manage their money. 

What are some obstacles for Solana and DeFi in general?

Yakovenko: I think it's just our capacity to educate people--that's the main obstacle.

What are you focusing on for Solana over the next few months?

Gokal: The fastest path to a billion users is pretty much it. We’ve seen how fast technology can grow and penetrate most of humanity, if not all of it, if it’s got the right building blocks in place, and we feel those building blocks are in place.

The order of operations, which use cases, which industries come in—it’s very clear that with DeFi, most of the financial services world and the banking world are starting to get it. They see an unignorable, growing force of change that in some cases is threatening, but in many ways enabling their business. I think the same is going to happen in gaming and payments, ticketing,  really everything that is a marketplace.

DEAL WATCH

• Bitwise Asset Management completed a $70 million Series B funding round that valued the company at more than $500 million. New investors included Daniel Loeb’s Third Point and Stanley Druckenmiller. 
• Crypto exchange dYdX raised $65 million in a Series C funding round led by Paradigm. The company plans to use part of the capital to develop a mobile app. 
• INX Limited, a crypto exchange, acquired ILS Brokers, an Israeli over-the-counter desk that does foreign exchange trading, for $4.75 million. The transaction shows the growing connection between crypto and traditional finance. 
• Umee, a DeFi protocol designed to connect different blockchains, raised $6.3 million in a seed round led by Polychain Capital. Other investors included Coinbase Ventures, IDEO CoLab and Alameda Research. 

WHAT WE’RE READING

• The Brutal Truth About Bitcoin (NYT)
• 81% of Fund Managers Still Think Bitcoin Is a Bubble (Decrypt)
• Soccer Clubs Embrace Cryptocurrency, but Fans Are Divided (Reuters)

Thank you for reading the Crypto Global newsletter. I’d love your feedback, ideas and tips: [email protected]. 

This article has been updated to include Solana Labs’ full name and to clarify a reference to Solana’s aspirations as a rival to financial institutions.